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THE FINANCE MINISTRY AFFAIR

Two former Finance Ministry officials are being prosecuted

A criminal investigation concerning Sergei Kolotukhin, former deputy finance minister and right-hand man of Mikhail Kasianov, has been linked to the case of Denis Mikhailov, a former deputy director of the same Finance Ministry department. Both cases concern state debts and abuse of office.

According to our sources, the Federal Security Service (FSB) is conducting a criminal investigation that concerns Sergei Kolotukhin, former deputy finance minister and right-hand man of Mikhail Kasianov. Kolotukhin resigned as director of the Finance Ministry’s international financial relations department in September 2004, and was summoned for questioning soon afterward. The criminal case is based on evidence of misappropriation in repayments of Russia’s state debt to the Czech Republic. It became known recently that the FSB has linked the Kolotukhin case to the case of Denis Mikhailov, a former deputy director of the same Finance Ministry department who is accused of exceeding his authority, bribe-taking, and disclosing state secrets.

According to the official version of events, Sergei Kolotukhin resigned as director of the Finance Ministry’s international financial relations department, and left the Finance Ministry entirely, at his own initiative in 2004. At the time, some media reports suggested that the resignation had been prompted by Finance Minister Alexei Kudrin. Kudrin was dissatisfied with a transaction involving part of Russia’s state debt, carried out in Germany two months earlier. Kolotukhin had been in charge of that transaction.

According to our sources, within two weeks of his resignation, on September 30, Kolotukhin was summoned for questioning by the Prosecutor General’s Office. There he learned that he was facing criminal charges under Article 286.1: exceeding official authority. The charges against Kolotukhin concern procedures used in restructuring Russia’s debt to the Czech Republic.

It should be explained that if Kolotukhin is convicted, he would face up a prison term of up to four years.

According to Kolotukhin’s lawyer, he has not been officially informed of his client’s case being transferred from the Prosecutor General’s Office to the FSB investigation directorate. But this is exactly what happened in March to the case of Denis Mikhailov, deputy director of the Finance Ministry’s department for international financial relations, state debts, and state financial assets. According to his defense team, this happened because the Prosecutor General’s Office couldn’t manage to accumulate the necessary evidence, and asked the FSB to take on this task. The prosecution’s version of events is that immediately before his arrest (late November 2004), Mikhailov allegedly handed over some documents relating to procedures for repaying Vietnam’s state debt to Russia to Alexei Kirzhnev, International Investment Bank chairman of the board, and Teimuraz Karchava, president of the National VIP club. It should be noted that such debts, which are essentially state obligations, are in fairly high demand on the securities market. As the settlement date approaches, a debt becomes more valuable. Thus, any information about a country’s intention to repay its debts within a certain timeframe is valuable for market players.

FSB agents who kept Mikhailov under surveillance for several months have reportedly found evidence that he did pass those documents to Kirzhnev and Karchava. According to investigators, Kirzhnev and Karchava gave Mikhailov a Mercedes SLK as a reward for his services. Having valued the car at 87,000 euros, the investigators classified it as a major bribe.

Mikhailov, 35, has been charged under three articles of the Crime Code: revealing state secrets (Article 283.1), abusing his powers of office (Article 285.1), and bribe-taking (Article 290.4.g).

The Lefortovo Court ruled yesterday that the period in custody should be extended for the three key figures in this criminal case – Denis Mikhailov, Alexei Kirzhnev, and Teimuraz Karchava. All three will remain in the Lefortovo pre-trial detention center for at least three more months.

Mikhailov’s lawyer Andrei Nozdria told us: “The investigation has been under way for five months, but no evidence of my client’s guilt has been produced yet. At the court hearing yesterday, we argued that he should be released on bail, with a written undertaking not to leave the country. All in vain. In my view, Judge Yulia Silayeva had no solid arguments for her decision to leave Mikhailov in detention until August 26. We believe that further charges will be issued against him.”

According to Mikhailov’s defense team, their client considers himself entirely innocent; throughout the investigation, he has declined to give evidence, citing Article 51 of the Constitution. His parents did the same when they were summoned to give evidence last week.

The news of the two cases being combined (the Kolotukhin case and the case of Mikhailov, Kirzhnev, and Karchava) was completely unexpected for the defense lawyers.

Alexei Kirzhnev’s attorney, Vladimir Levin, told us: “This decision is entirely unfounded. I do understand why the investigators have done this, but I can’t discuss it – I’ve given a written undertaking not to reveal certain information.”

According to Mikhailov’s defense team, their client and Kolotukhin have only one thing in common: they worked together at the Finance Ministry. After Kolotukhin resigned in September 2004 as director of the department for international financial relations, state debts, and state financial assets, Mikhailov was considered the most likely candidate to replace him.

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